Grow The Pie

There are two popular business metaphors that capture different ways of approaching and managing markets. One is “grow the pie” and the other is “slice the pie”. For those of you not familiar with these metaphors, growing the pie refers to creating new markets and opportunities (typically through innovation), while slicing the pie refers to dividing and dominating existing markets, the so-called zero-sum game. It’s important to understand the dynamics of these forces in order to develop viable business plans, and it’s fascinating to see how these dynamics fit into the open source culture.

One thing to note here is that there are few business endeavors that exclusively practice either one or the other approach. Even if a revolutionary new idea is created by a “grow the pie” company, competitors will soon appear and pie slicing will commence. To some extent what these metaphors describe is the core attitude toward business activities: pie growers want to pursue leading edge concepts and build exciting new opportunities; while pie slicers want to exploit their advantages and resources, and often staunchly defend the status quo, especially when it benefits them.

Both approaches are necessary to the product cycle. Pie growers often fail to develop advantages inherent in their technology, at which point it takes pie slicers to tease out further value (where they often become pie growers). Conversely, pie slicers become invested in an existing technology, despite being inefficient or even counterproductive to the health of a market, and may be displaced by pie growers. To me a good example of the dynamics of pie growing and pie slicing is the iPod phenomena. Apple did not invent mp3 and digital audio formats, but they took advantage of an unexploited market and poor, extant designs to initially slice up and dominate a clearly immature market. They then grew whole new markets (e.g., iTunes and the app store).

Technology companies like Kitware are typically pie growers. We create new products and technologies. However, from another perspective Kitware can be considered a pie slicer, since our open source products (e.g., VTK) have done a very good job of disrupting and dominating some existing markets (e.g., visualization tools). This leads me to the heart of this blog: pie growing and slicing in the open source world.

I have heard the criticism on several occasions that open source products are not innovative: open source systems are derivatives or cheap knock-offs of “real” commercial products (i.e., open source companies are engaging in pie slicing). Unfortunately, at this time I believe there is some truth in this criticism, although I feel that this situation is rapidly changing, and open source communities will soon be the source of significant innovation and hence, become major pie growers.

I see two major reasons why open source technologies are poised to become even more significant innovation engines. First, because of increases in technological complexity and scalability issues (see “Why Open Source Will Rule Scientific Computing”), future technological advances will require even more collaboration. Open source communities are clearly fantastic collaboration venues (as has been argued and demonstrated again and again), and OS contribution to collaborative innovation will only increase. While it’s likely that organizations with deep pockets will continue to be major innovators since they can quickly deploy human and capital resources, I see open source communities spinning off proportionally more innovation and continuing their ascent as a major force in the market.

Second, in order to become a meaningful cultural and business force, OS technologies have had to demonstrate that they can go head to head with existing, commercial technologies and if not prevail, at least hold their own (i.e., compete in a pie slicing world). This is obviously now true as there are many cases where open source systems are the dominant players in certain markets. Frankly, I find this to be a positive development because there are commercial solutions and businesses out there that, to be blunt, have been hampering technological growth and are due for some creative destruction. However, now that OS solutions have proven themselves, it is time for the open source community to stop looking toward proprietary competitors for inspiration, and instead leverage OS advantages and community passion to leave these competitors in the dust.

I think we at Kitware are on the vanguard of this effort, and the management team is actively encouraging and supporting our team as it innovates into the future. At this point, more often than not I view proprietary products with a certain amount of frustration, because associated advocates (and companies) work so hard at protecting their piece of the pie, and have long forgotten the importance (and reward) of growing the pie. In some cases I actually see this behavior as destructive since in many cases we can grow the pie much faster than the market competitors could ever slice it up. I know at Kitware we are going to continue growing new markets and developing new technologies, and I am confident that other open source companies will join us to become a dominate force in the creation of new technology.

One Response to Grow The Pie

I think it would be interesting to imagine a world where these changes have been accomplished.

The incentives would be completely changed.
The models of monetization would be completely changed.
The processes and outcomes would be completely changed.
Really, all the forces that shaped the current environment, including the current structure of Open Source, would no longer exist – or if they exist, they would be very different.